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ECONOMIC AND HOUSING OUTLOOK

ECONOMIC AND HOUSING OUTLOOK. Blue Ridge Home Builders Association February 27, 2014. David Crowe Chief Economist. Five Turn Around Points 1. Consumer is back 2. Pent up demand waiting 3. Growing need for new construction 4. Distressed sales diminishing 5. Builders see it .

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ECONOMIC AND HOUSING OUTLOOK

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  1. ECONOMIC AND HOUSING OUTLOOK Blue Ridge Home Builders Association February 27, 2014 David Crowe Chief Economist

  2. Five Turn Around Points1. Consumer is back 2. Pent up demand waiting 3. Growing need for new construction 4. Distressed sales diminishing 5. Builders see it

  3. 1. Consumer is back

  4. Real GDP GrowthPicking up speed 3.7% 3.0%

  5. Payroll Employment: US and Charlottesville US and Charlottesville are nearly back Millions US Trend (Left axis) US

  6. Unemployment Will Continue to Fall Charlottesville

  7. Consumer Confidence Returns Back to pre-recession levels University of Michigan Conference Board

  8. Motor Vehicle and Home Furnishing Sales Other Durable Sectors Rising Steadily

  9. Household Balance Sheets Debt and savings closer to long term averages Savings Rate

  10. Annual Housing Starts Pace - VA 13%

  11. Annual Housing Starts Pace - Charlottesville 7%

  12. 2. Pent up demand waiting

  13. Household Formations Are on the RiseYear-over-year change in households rising again Thousands Avg: 1.4 million (12% renters) Avg: 0.6 million (129% renters) Avg: 0.5 million (130% renters )

  14. Share and Excess Number of Young Adults with Parents

  15. Local Population Growth Exceeds National Average % change

  16. 3. Growing need for new construction

  17. Home Sales VolumeNew homes have more ground to make up (000s) (000s)

  18. New Homes Share of SalesNew homes half historic share of sales

  19. Existing Home Turnover RateCurrent turnover lower than normal

  20. Cumulative Lost Existing SalesSubstantial pent up sales

  21. House Prices Return to Near-Normal House Price-to-Income Ratio USCharlottesvilleVirginia Long-term 3.2 3.3 2.9 Peak 4.7 4.8 5.1 Current 3.7 3.9 4.0 Peak/Long-term US: 4.7/3.2 = 150% Charlottesville: 4.8/3.3 = 149% Virginia: 5.1/2.9 = 175%

  22. Rates (inverted) & New Home SalesStill room for higher rates & more sales Forecast

  23. 4. Distressed sales diminishing

  24. Seriously Delinquent Rates: Peak and Current - Largest correction in states with highest peak

  25. 5. Builders see it

  26. Builders’ Concerns Increasing Share of builders citing issue

  27. Forecasts

  28. Remodeling Market Index (RMI)Above 50 for 5 of the past 6 quarters

  29. Residential Remodeling Billions 2009 $, SAAR Adjusted Actual

  30. Multifamily Production IndexAbove 50 for seven consecutive quarters (000s)

  31. Multifamily Housing Starts Healthy Response from Growth in Renters 2013Q4: 106% of “Normal” Trough to Current: 4th Q 09 = 82,000 4rh Q 13 = 351,000 +328%

  32. NAHB/Wells Fargo Housing Market IndexBuilder sentiment dips, but improved overall from recession depth Single-family starts (R) HMI (L)

  33. Existing and New Home Sales – On the Rise New (L) Existing (R)

  34. Single-Family Starts – Beginning a Recovery 2015Q4: 93% 2013Q4: 49% of “Normal” Trough to Current: Mar 09 = 353,000 Jan 14 = 573,000 +62%

  35. Percent of 'Normal' (annual average 2000-2003)

  36. Single-family Permits Relative to ‘normal’ annual average 2000-2003

  37. Recovery Will Vary By State Source: US Census Bureau

  38. Rank Q4 2015 Bottom 20% 20% to 40% 40% to 60% 60% to 80% Top 20% The Long Road Back to Normal Relative to Normal < 84% 84% - 88% 89% - 94% 94% - 101% 102% < This map shows how the states rank in the return to more normal levels of housing production. By the end of 2015, the top 20% will be back to normal production levels. The bottom 20% will be below 84% of normal production.

  39. Questions?Answers: www.housingeconomics.comeyeonhousing.org dcrowe@nahb.org

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